Top 9 Things You Need to Know About Business Credit

If you are a business owner or aspire to be one, business credit is the first term you should be familiar with....

Top 9 Things You Need to Know About Business Credit

If you are a business owner or aspire to be one, business credit is the first term you should be familiar with.

For small business owners, the term is important for survival. For large businesses, it is important to help them expand and grow their business.

From sole proprietors to LLPs and any firm in between, the term is important for more or less the same reason- Funding.

Then what is it about a business credit card that you need to know?

Let’s find out!

What Is Business Credit?

Business credit cards are important for handling business expenses. It is like a necessary evil that businesses cannot afford to ignore.

Business credit is essential that will help lenders evaluate repayment history. Even if you need a short-term fund requirement, business credit and the associated credit score are what lenders look into before giving you credit.

With money comes responsibility and funnily enough a long list of terms and conditions. New businesses especially should be very careful about these terms for business credit usage- it could be for travel, office supplies, etc. The card should never be used for personal expenses.

Who Qualifies for Business Credit Cards?

Almost all business owners qualify for a business card so long as they have a good personal credit history.

It is also important for business owners to keep personal credit and business credit cards separate.

If you identify yourself with any of the following you will be eligible to get a business credit card:-

  • Freelancers/ Sole proprietors
  • Limited liability companies
  • Small business owners
  • Large business owners
  • Corporations

Top 9 Things You Need to Know About Business Credit

#1 More Information Is Required for Business Card Application

You will need to provide more information while applying for business credit rather than what may be required for the personal credit card. Typically one is asked the following in case of business credit –

  • Name,
  • Date of Birth,
  • Social Security Number
  • Address.
  • The Name of Business,
  • Industry,
  • EIN(If Applicable)
  • Revenue.

#2 Official Registration or Incorporation Not Required

Unregistered, Independent, unincorporated business owners needn’t worry as they are also eligible for business credit. However, they should remember that they will be personally liable for all debt-related issues.

#3 Company Demography Is Crucial for Business Credit

What does that mean?

It means that information on how long you have been in business, the number of employees working for you, the industry your business belongs to and much more comes into the picture to make up your total business credit score.

Side note: Bear in mind, this information is not only important for your business credit score but also for firms that wish to partner with you.

#4 Privacy Truly Is a Myth

Business credit information is made public and anyone can check your business credit score.

You have no choice regarding this.

Know that your information is being made public with data on legality, bankruptcies, and liens. Additionally, you will know when your credit history has been pulled up even though you may not know who pulled it up.

#5 Business Credit Is Dynamic and Transferable

Business credit stays as long as your business is alive. In case you sell your firm, your credit score will also be transferred. In contrast, your personal credit score stays until you live.

#6 Business Credit Differs From Personal Credit

Many may not be aware that credit history involves data curated from past loans, credit repayment records, and even utility payments – all these can impact personal credit.

Credit lenders look at both business and personal credit history to know for sure if you qualify for a credit card or not.

Experts Say: Experts at Karbon Business suggest even small business owners with no credit history need to consider getting a business credit card affiliated with at least one credit bureau.

Small businesses may not need business credit in the near future but there will surely come a time when it will be needed. When they do go through that process, they will realize every percent of the interest they are charged, came as a direct consequence of their business CIBIL score.

#7 Business Cards Don’t Have Many Liability Protections

This is a legal assurance, not just a fact spewed in the air.

The RBI rules allow personal cardholders to enjoy benefits such as 0 liability, 21 odd days grace period for payback, etc.

However, business credit cards have no such exemptions. Certain business credit cards do offer this protection but keep note of the terms and conditions.

Business credit cards involve debt liability like commercial liability and joint liability.

Commercial liability is enjoyed by large firms where the business alone is liable for debts, not the cardholder.

Joint liability is usually applicable to small businesses and sole proprietors which means both business and the cardholder are liable for debts.

#8 Employee Identification Number (EIN) Is Important

An employee ID number is required to file taxes for your business. Such an EIN will help you track your financial history and build credit.

Moreover, employees will also easily get their online business banking solution.

#9 Business and Personal Credit Is Different

Business Cards come with higher credit limits than personal Cards. Additionally, business cards come with greater rewards than personal credit cards

A hard inquiry or a business credit report when pulled up affects your credit score. So every time a lender needs to check your credit history your score takes a hit. This is another reason why it is important to have a business credit card.

It is also super important to keep your firm’s name clean while applying for credit. Business credit can be ruined by a business with a similar name. For eg: Harvey Construction Inc may be confused with Harvey Construction Co.

How Is Your Business Credit Score Determined?

Business credit scores have a range of 0-100. 0 represents high risk and 100 low risks.

Any score above 75 is considered outstanding.

The factors that determine the score are:-

  • Outstanding balances, Trade experience, repayment history, credit usage trend over some time, etc.
  • Associated bankruptcies, liens, and judgments
  • Business lifespan, Standard Industrial Classification (SIC) code, business size including the number of employees, etc.

How to Build Your Business Credit Score?

There may not be one fixed way to improve your credit score. But the following can be done to maintain a decent record.

  • Keep a hawk’s eye on the business credit reports. Verify if the information is up-to-date and accurate. If not, immediately get it rectified.
  • Repay lenders on time. Simple. You have a deadline. Keep up with it.
  • Trust companies that report their trades. Only then establish business credit with them(Not all firms report business trade).
  • Keeping a credit balance at 20% to 30% of the assigned credit limit is a wise practice.
  • Urge your vendors to report your timely payments. This will automatically help you build a positive credit history.

How to Protect Your Business Credit?

Protecting your business credit is indeed just as important as building it.

  • Monitor your rating as your customers are doing just that.
  • Make it a routine to monitor transactions and to keep tabs on fraud transactions that are only too common nowadays.
  • Compare and learn with competitor credit analysis.
  • Strategies to improve the company’s credit rating.
  • Strategic fund allocation is vital.
  • Build very strong vendor and customer relations

Smart Tip: To maintain good business credit, follow two simple rules -Always pay bills on time and be on good terms with your vendors and customers.


Owning a business in itself is a huge undertaking. You are further overburdened with funding and vendor management.

But focussing on business credit can go a long way in helping you gain the funds you need. This will also help you keep your overhead costs very low.

Putting efforts into understanding business credit is a smart move. Choosing the right corporate credit card is even smarter. Just choose one that offers rewards and perks most suitable for YOUR needs.

On a final note, never stop cultivating good credit habits. Make sure you make the right financial moves – Do it once, do it right.

Happy Crediting! 


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Can Someone with Bad Personal Credit Score Get a Business Loan?

Written by Ramitha Ramesh
Ramitha Ramesh is the editor at Karbon Business, working as an SEO content marketing strategist for Karbon, with clients from the US, UK and India.

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